Glen...I took the sample you posted of your palette and pasted it in and works fine now.
Curious thing...some of my palettes have c:\mscad2004\\mscad\palettes etc. while others have =~\palettes\etc...
I thought maybe it changed format after copying and pasting while creating custom palettes but that is not the case.Here is the last one I created.

BUTTONS
BEGIN
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\COGO.BMP,{Command Line COGO},[FCMD]^^COGO
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\batch.BMP,{Load Batch COGO},[FCMD]^^ms_batch
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\COGOCURV.BMP,{COGO Curve Calculations},[FCMD]^^curves
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\ON-OBJ.BMP,{Compute points on line or curve},[FCMD]^^ms_comp_points_on_line_curve
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\TURNED.BMP,{Compute by Turned Angle and Distance},[FCMD]^^ms_comp_points_turned_angle
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\STA-OFF.BMP,{Compute Points By Station / Offset off a line or curve},[FCMD]^^ms_comp_points_stn_offset
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\DOT2DOT.BMP,{Lines by Inversing (dot to dot)},[FCMD]^^connect_points
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\LINE-TAN.BMP,{Compute a Line Tangent to Curve},[FCMD]^^ms_line_tangent_curve
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\DESC2D.BMP,{Connect by Description},[FCMD]^^joindesc
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\FIT-LINE.BMP,{Compute a best fit a line through some points},[FCMD]^^ms_calc_best_fit_line
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\FIT-CURV.BMP,{Best Fit a Curve through a series of points},[FCMD]^^best_fit_curve
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\PRO-CURV.BMP,{Curve Problem Solver},[FCMD]^^(if (not f:load)(load "msdesign"));curvcalc
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\row.BMP,{Right of Way routine},[FCMD]^^right_of_way
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\CURV-TAN.BMP,{Curve Off One Tangent},[FCMD]^^arc_on_tangent
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\TANCTAN.BMP,{Curve On Two Tangents},[FCMD]^^arc_on_two_tangents
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\REVCOMP.BMP,{Reverse or Compound Curve},[FCMD]^^reverse_curve
BITMAPBUTTON =C:\MSCAD2004\\MSCAD\PALETTES\proport.BMP,{Proportion Points on a Line or Arc},[FCMD]^^do_proportion
END